A Guide to Travel Insurance (And When Not to Buy It)

When you book flights online, you're typically prompted to buy travel insurance. Same with cruises and tours.

Should you buy the insurance? What will it cover? Equally important, what won't it cover, and when might it not be worth your while?

The AP Travel podcast "Get Outta Here!" got the answers to these and other questions from Beth Godlin, president of Aon Affinity Travel Practice. Aon, a global insurance broker that represents insurance companies, creates specialized travel products, including insurance policies sold by cruises, tour operators and certain online booking sites.

Excerpts from the podcast interview :

TRAVEL INSURANCE: WHAT IS IT GOOD FOR?Typically travel insurance protects your financial investment in your trip, to "cover penalties and extra costs you would incur" if you couldn't take your trip or if your trip was interrupted, Godlin said.

For example, say you need to cancel a trip or head home early because of a death in the family or because a hurricane is headed to your beach destination. This type of insurance reimburses prepaid expenses - flights, tours, hotel - as well as expenses incurred because the trip was interrupted, like rebooking fees for new flights. This type of insurance also covers additional costs incurred if your trip is delayed - for example, you miss a connection because of a storm and need to stay overnight in a hotel before catching the next flight out.

A third category protects "your stuff," Godlin said, meaning whatever you bring with you or pack that's not covered by existing insurance, in case of loss, damage or theft.

WHEN WOULDN'T YOU BUY INSURANCE?Buying insurance should be based on potential losses and what you can afford to lose.

If you're staying in a hotel that won't charge you if you cancel, or you're taking a trip booked with miles but you can get the miles back with no penalty if you cancel, you don't need insurance because your losses would be zero.

But if you stand to lose your investment should you cancel, can you live with that risk?

Typically, insurance costs 6 percent of the cost of a trip. So for $60, you can insure a $1,000 trip. What's your comfort level on the money? Would you rather spend the extra $60 and know that you're covered? Or can you live with the possibility that if the trip falls through for some unforeseen reason, you could lose most of what you spent on flights and other nonrefundable components?

"You have to do the math," Godlin said. "What's the penalty versus what would be the cost to insure it?"

EXCLUSIONS AND TIMINGRisk assessment is also a factor. If you're planning now for a Caribbean trip in September, that's prime hurricane season. Insurance would mitigate potential financial losses if a storm disrupted or caused the cancellation of your trip.

But you cannot get insurance to cover specific problems that already exist. So if your trip starts Friday, and a storm is already headed to your destination, it's probably too late to buy insurance.

"Insurance is designed to protect the unforeseen," Godlin said.

Similarly, if a family member was just admitted to the hospital, it's probably too late to buy insurance to cover the possibility that you'll have to cancel a planned trip if that person's condition worsens. Godlin advises calling the insurer and asking if reimbursement would be offered in that scenario, "or is that an exclusion."

Buying insurance when you book your trip is the best way to assure your claims will be covered, but many policies can be purchased until the day before the trip. That said, of course, you can't sprain your ankle on Monday, buy insurance on Tuesday and cancel the trip om Wednesday.

Typically, exclusions - things not covered by insurance - include pre-existing medical conditions (though you might be covered if your medical condition has been stable and there's an unexpected, new complication) and work-related issues (a last-minute deadline that the boss can't handle without you).

One option that covers every scenario: cancel-for-any-reason insurance. That gives you flexibility to just say, "it's just not a good time for me to go," Godlin said. Typically, though, that type of insurance only reimburses 75 percent of your cost rather than the 100 percent with other types of policies.

TERROR ATTACKSWhat if a terror attack unfolds somewhere and you're feeling so nervous that you want to stay home? If the attack shuts down the city you're headed to, you may be covered. But if the attack is in a provincial capital and you're heading to a different region, you probably can't make a case for an insurance claim unless you have cancel-for-any-reason insurance.

And if insurance doesn't cover your situation, or you don't have insurance, it's always worth contacting the airline, hotel or tour operator. Sometimes travel providers are sympathetic to individual problems or when the public feels skittish following a major event. Even if you can't get a refund, you might get credit toward a future trip.

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